Higher inflation boosts the Canadian dollar

By Callum HolmesNovember 24th, 2014

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The Canadian dollar rose to its highest level in November on Friday after a report came out stating that inflation rose faster than initial expectations. This boosted support for the notion that the Bank of Canada will signal that it is closer to raising interest rates.

The Canadian currency rose its most in almost two months as the Consumer Price Index (CPI) jumped 2.4% compared to this time last year – it was also up from September’s reading of 2.1%.
The Canadian currency finished last week up almost a cent against its US counterpart and up well over a cent against the euro after the euro came under pressure following reiteration from European Central Bank (ECB) President Mario Draghi on Friday that the central bank is prepared to act rapidly if low inflation persists.

China’s surprising decision to increase monetary stimulus and ultimately cut its benchmark interest rate to 5.6% has had a knock-on effect on the Australian dollar. Australia is a close trading partner with China and China’s slowing economy is weighing heavily on the Australian currency.

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